Social Security for Low Income Propels the Economy through Dollar Multiplier

Yes. President Bush has repeatedly said that those who put their money in private accounts are "guaranteed" a better return than they'll receive from the current Social Security system. But every sale of stock on the stock market includes the disclaimer: "the return on this investment is not guaranteed and may be negative"--for good reason. During the 20th century, there were several periods lasting more than 10 years where the return on stocks was negative. After the Dow Jones stock index went down by over 75% between 1929 and 1933, the Dow did not return to its 1929 level until 1953. In claiming that the rate of return on a stock investment is guaranteed to be greater than the return on any other asset, Bush is lying. If an investment-firm broker made this claim to his clients, he would be arrested and charged with stock fraud. Michael Milken went to jail for several years for making just this type of promise about financial investments.

In fact, under the most likely version of the Bush privatization proposal, a 20-year old worker joining the labor force today would see her guaranteed Social Security benefits reduced by 46%. Bush's own Social Security commission admitted that private accounts are unlikely to make up for this drop in guaranteed benefits. The brokerage firm Goldman Sachs estimates that even with private accounts, retirement income of younger workers would be reduced by 42% compared to what they would receive if no changes are made to Social Security.


http://www.dollarsandsense.org/archives/2005/0505orr.html

The Pros and Cons of Debt Ceiling on Economy

It increases the debt ceiling enough so that this all-consuming debate does not completely resurface for a significant amount of time (until after 2012 elections). This lends some much-needed stability to the circus that is Wall Street. It also frees up the political arena for a discussion of more meaningful issues, like jobs. Congress has been neglecting our stagnating economy and its bleak recovery for months, instead captivated by the spell of these circuitous negotiations. Just how bad is the economy? The unemployment rate is 9.2%. According to the latest report, manufacturing growth fell to its lowest in years. All increases in the GDP since the recession began have been pocketed by the wealthiest in America: the owners. The middle and working classes continue to struggle financially, and the amount of wealth owned by employees is plummeting when expressed as a percentage of the total economy. Meanwhile, the gap between the median household wealth of whites and minorities is expanding. White families own goods and savings that are worth (on average) 18 times the possessions of Hispanic households and 20 times the possessions of black households. That's a disparity that needs to change, and one that is sadly neglected by decision-makers in Washington.

Second, the bill cuts big chunks of fat out of the bloated defense budget. Our military industrial complex spends so much that it dwarfs the defense spending of the next dozen nations combined. The bill could lead to approximately $1 trillion in Pentagon cuts spread over a decade, which represent an annual trimming of 15% from the base budget. The only downside is that many of these cuts are relatively uncertain.

http://www.politicalmusingsfrommonterey.com/2011/08/more-pros-than-cons-in-debt-ceiling.html

Several recent polls have shown that the American people appear to be significantly opposed to raising the debt ceiling.

A recent NBC/Wall Street Journal Poll showed that people opposed raising the debt ceiling, even after being given pros and cons of it, by a 62 to 32% margin. Quinnipiac showed in February that on the question of whether failing to raise the debt ceiling was a good or bad thing, people were evenly split, with 46% saying it would be a good thing and 44% saying it would be bad. Ipsos/Reuters did a poll where people opposed raising the debt ceiling 71% to 17%.

These are numbers which very few policy positions get. It's in the range where even many Democrats must oppose raising the debt ceiling. But why is that?

The first problem might be a misunderstanding of what the debt ceiling is. I'm just conjecturing here, but the term "debt ceiling" isn't exactly clear, and in a time when people are increasingly concerned about the deficit, it is also scary sounding. It could sound like permission to increase our yearly deficit even more beyond the $1.5 trillion it already is. If that's what people think it means, then one could clearly see why people would oppose it, even many Democrats.

Other people might not understand what it is there for - that, even though Congress has appropriated money, the treasury still can't borrow more than Congress allows it to do. If the credit limit Congress has set on itself is less than the amount of deficit spending Congress has authorized, then we'll bump into the ceiling.

Others, again, may just have this nebulous thing about how debt is "bad" and therefore, of course we shouldn't have more of it.

The second problem is that people just aren't aware of the consequences of failing to raise the debt ceiling. The consequences are so dire than even people like John Boehner and Paul Ryan have said that there is no question we must raise it.

Some recent poll questions have tried to solve this problem, but frankly, have largely been lacking in their explanations.

http://www.bluewavenews.com/2011/04/why-are-people-opposed-to-raising-debt.html




 

The Myth of Tax Cuts and Growing the Economy

VARNEY: The central question on the economic side of the debate is which tax policy will grow the economy and cut the deficit. Paul Ryan was very clear -- he said, look, you cut tax rates, and that gives you growth. Listen to this exchange.
[begin video clip]
RYAN: You can cut tax rates by 20 percent and still preserve these important preferences for middle-class taxpayers --
BIDEN: Not mathematically possible.
RYAN: It is mathematically possible. It's been done before. It's precisely what we're proposing.
BIDEN: It has never been done before.
RYAN: It's been done a couple of times, actually.
BIDEN: It has never been done before.
RYAN: Jack Kennedy lowered tax rates, increased growth. Ronald Reagan --
BIDEN: Oh, now you're Jack Kennedy?
RYAN: Ronald Reagan --
[end video clip]
VARNEY: Well, that was an interruption. That was also a put-down. And Vice President Biden was factually wrong. JFK, Ronald Reagan, George W. Bush -- all of them cut tax rates, and the end result was in increase in money flowing to the Treasury. Revenues went up when tax rates went down. Joe Biden was wrong. [Fox News, America's Newsroom, 10/12/12]

The Economy At Mid-1983
Recovery started in December 1982 from the deepest postwar recession, the second of two since 1980. Both recessions were brought on by monetary restriction aimed at bringing inflation under control. Lower interest rates after mid-1982 permitted the recovery to begin. Real GNP grew at a 2.6 percent annual rate in the first quarter and at an 8.7 percent annual rate in the second quarter of 1983. [Congressional Budget Office, 8/1/83]



The upshot was that Kennedy entered office with the nation's finances in good shape. Yes, the debt-GDP ratio would fall further until it hit its low point of 32.6 percent at the end of the Carter administration. But with a deficit of only 0.6 percent of GDP for the 1961 fiscal year in which JFK took the oath of office, there was room for additional spending or for tax cuts.
[...]
Individual income tax revenues stumbled for one year, but then continued up. Corporate tax revenues rose, without interruption, along with the economy.
But other things were happening. The federal government was spending a lot of money on interstate highway construction, military hardware, the space race and education. Much of this -- especially infrastructure, science, engineering and education -- boosted productivity for the overall economy. And the Federal Reserve let the money supply grow faster than it had in the 1950s. These factors all helped foster fast-growing output and, hence, growing tax revenues. [Bismarck Tribune, 10/10/10]


Advocates of lower tax rates argue that reduced rates would increase economic growth, increase saving and investment, and boost productivity (increase the economic pie).
[...]
The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.
However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. [Congressional Research Service, 9/14/12]

I used the phrase "charlatans and cranks" in the first edition of my principles textbook to describe some of the economic advisers to Ronald Reagan, who told him that broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue. I did not find such a claim credible, based on the available evidence. I never have, and I still don't.
[...]
My other work has remained consistent with this view. In a paper on dynamic scoring, written while I was working at the White House, Matthew Weinzierl and I estimated that a broad-based income tax cut (applying to both capital and labor income) would recoup only about a quarter of the lost revenue through supply-side growth effects. For a cut in capital income taxes, the feedback is larger--about 50 percent--but still well under 100 percent. A chapter on dynamic scoring in the 2004 Economic Report of the President says about the the [sic] same thing. [Greg Mankiw, 7/2/07]

You [in the Bush administration] are smart people. You know that the tax cuts have not fueled record revenues. You know what it takes to establish causality. You know that the first order effect of cutting taxes is to lower tax revenues. We all agree that the ultimate reduction in tax revenues can be less than this first order effect, because lower tax rates encourage greater economic activity and thus expand the tax base. No thoughtful person believes that this possible offset more than compensated for the first effect for these tax cuts. Not a single one. [Vox Baby, 1/3/07]




http://mediamatters.org/research/2012/10/12/fox-uses-vp-debate-to-revive-myth-that-tax-rate/190590

Mother Jones on the myth of Tax Cuts and Economy Growth

http://www.motherjones.com/politics/2011/10/charts-economic-myths-jobs-deficit-taxes